ACCIDENT BENEFITS NEWSLETTER - AUGUST 2003

- Catherine Zingg

Insurance Act - Section 275 - Loss Transfer

In Unifund Assurance Company v. Insurance Corporation of British Columbia (2003), S.C.C. 40, two Ontario residents were injured in British Columbia when their rental car was hit by a tractor trailer. All of the vehicles in the accident were registered in British Columbia and insured by the Insurance Corporation of British Columbia (ICBC). The insureds, Mr. and Mrs. Brennan, were severely injured and received $750,000.00 in accident benefits from Unifund. Under British Columbia law, ICBC was entitled to deduct no-fault payments made to the Brennans from the tort award (approximately 2.5 million dollars) that it was liable for. Unifund took the position that ICBC should pay it the $750,000.00 that it had paid out in accident benefits, pursuant to s. 275 of the Ontario Insurance Act. The Ontario Court of Appeal reversed the decision of a motions court judge, which granted ICBC a stay of the proceedings. The Court of Appeal found that the motions judge should have proceeded with the appointment of an arbitrator under the Arbitrations Act, 1991, who could then deal with any issues of jurisdiction and law, including the constitutional issues (p.2). In allowing ICBC’s appeal, the Supreme Court of Canada stated:

Having concluded, in response to the constitutional question, that the Ontario regulatory scheme does not apply to the out-of-province appellant on the facts of this case, the issue of forum non conveniens is moot. There is no statutory cause of action available to the respondent to sue upon in Ontario or in British Columbia. Unifund’s application rests on a faulty constitutional basis and must be dismissed (p.24).

The Court also found that the Power of Attorney and Undertaking had no application to the facts of the case,

The PAU is about enforcement of insurance policies, not about helping insurance companies, which have been paid a premium for the no-fault coverage, to seek to recover in their home jurisdictions their losses from other insurance companies located in a different jurisdiction when the accident took place in that other jurisdiction, and where the claims arising out of the accident were litigated there (p.22).

SABS - 1996

Section 15 - SPPA

In Majer v. Kingsway General Insurance Company, A03-000466, Arbitrator Killoran held that Kingsway was not entitled to production of the transcript of the applicant’s examination for discovery in the related tort action. In making this ruling, the Arbitrator stated:

I agree with the insurer that the transcripts from the examination for discovery may be relevant. However, the dispute resolution system at FSCO does not include examinations for discovery. When an insured person chooses to arbitrate, rather than bringing a civil action, they give up both the possibility of being examined and of examining the other party prior to the hearing. A party would gain an unfair advantage if it could obtain production of a transcript from an examination for discovery from a related tort or other civil action. This would also lead to a distortion of the process at FSCO, as set out in the Insurance Act (p.6).

Section 37 - Payment Following DAC Report

In Sivaloganathan v. Liberty Mutual Insurance Company, A03-000317, July 4, 2003, the insured was injured in a motor vehicle accident on December 10, 2001. In a DAC report dated March 1, 2002, it was found that the insured was substantially unable to perform her pre-accident employment. Liberty Mutual requested Mrs. Sivaloganathan attend an IE, which took place in August 2002. On the basis of this report, Liberty stated that it would terminate benefits on September 27, 2002, but actually paid them until October 29, 2002. Mrs. Sivaloganathan was advised that the benefits would be terminated unless she elected to attend a further DAC assessment. Following the reasons in Sellathamby v. Allstate Insurance Company of Canada, A01-000313, May 8, 2002; P02-00009, December 17, 2002, the arbitrator found that where an insurer determines that an insured person is no longer entitled to a benefit it may stop payment, but it is bound to follow the procedure set out in s. 37 which provides a detailed code of procedure that must be followed for a termination of benefits to be valid (p.6). However, it was also held that an insurer is not bound by the determination of a disability DAC that an insured person was substantially unable to perform the essential duties of her pre-accident employment (a positive DAC) in respect of her entitlement to income replacement benefits after the passage of the 104 weeks of disability as provided in s. 5(2)(b) of the Schedule (p.4).

It was also held that a change in the medical condition of an insured person subsequent to a positive disability DAC is not sufficient to allow an insurer to cause new assessments to be undertaken and terminate benefits contrary to the conclusions of the DAC (p.4).

Section 48 - Material Misrepresentation

In Fisk v. ING Insurance Company of Canada, A02-001682, July 2, 2003, the insured was injured in a motor vehicle accident on October 13, 2000. Weekly income replacements benefits were paid until June 10, 2002. Arbitrator Skinner was asked to determine whether Mr. Fisk had wilfully misrepresented a material fact in relation to his claim for accident benefits (p.2). ING had terminated benefits on the basis that Mr. Fisk had made a material misrepresentation pursuant to s. 48 of the Schedule by misrepresenting his employment status to Dr. C. Hoy, a specialist in physical and rehab medicine who conducted an insurer’s examination on April 10, 2001. It was further argued that Mr. Fisk had wilfully misrepresented a material fact in relation to his application for accident benefits because he did not inform ING that he worked for Dorsey Contracting from April 11, 2001 to May 22, 2001. The parties did not make submissions with respect to the issue of whether sections 47 and 48 of the SABS apply to insurer examinations. The arbitrator therefore assumed that the sections did apply, without deciding the issue. Dr. Hoy did not ask Mr. Fisk about his employment status. On a questionnaire that Mr. Fisk filled out, however, he indicated that he was receiving disability benefits. ING argued that this was a misrepresentation since Mr. Fisk knew on April 10, 2001 that he would be starting employment on April 11, 2001. Mr. Fisk submitted that he received a phone call at his home in Kenora, before sunset on April 10, 2001. The evidence, however, established that Mr. Fisk was in Winnipeg at 7:50 p.m. that evening. In light of this evidence, the arbitrator found that Mr. Fisk knew of his pending employment when he completed the questionnaire. Nonetheless, it was found that Mr. Fisk’s admission of information during his examination by Dr. Hoy did not constitute a wilful misrepresentation (p.6). The arbitrator also found that Mr. Fisk’s failure to advise the independent adjuster of his return to work was a misrepresentation. However, it was found that the misrepresentation was not “material” following the reasoning in Michalowski v. St. Paul Fire & Marine Insurance Company, A98-001492, July 9, 1999, in which it was stated:

A major consideration in determining the correct meaning of the adjective “material” as used in s. 48 must be the remedy available to the insurer... the question of whether the misrepresentation is “material” will depend on the facts of the particular case, and may include a consideration of, amongst other things, what is misrepresented, what is obtained as a result of the misrepresentation, the relationship in monetary and other terms between the misrepresentation and the potential benefits available, and the availability of other provisions to assist the insurer (such as s. 47 which deals with repayments) (p.11).

Dispute Resolution Practice Code - Rule 33 - Prehearings

In Lees v. Pilot Insurance Company, A03-000421, July 7, 2003, the insured was awarded $125.00 inclusive of GST in respect of his legal expenses for his counsel’s participation in a pre-hearing discussion. The insured had taken a day off work in order to attend the pre-hearing discussion on June 18, 2003 and lost $125.00 in wages. The applicant participated in the pre-hearing, with his counsel, Mr. Dale. The insurer was represented by its counsel, Mr. Griffiths, but Pilot did not have a representative participate. The pre-hearing was rescheduled for June 26, 2003. Pilot submitted that its counsel had full authority to deal with the pre-hearing discussion and that Pilot’s adjusters are rarely required to participate in pre-hearings. Arbitrator Blackman, however, stated the following:

Not requiring the principals themselves to be involved in the pre-hearing discussion, lessens the value of the pre-hearing discussion. It also lessens the worth of the meeting in the eyes of the participants. Not requiring both principals to participate in the pre-hearing discussion can imply an institutional bias, an assumption that one party’s time is more valuable than that of the other (p.4).

While he did not find that he had the authority to award the insured his lost wages, he awarded the legal expenses of the insured in the amount of $125.00, which was the amount that the insured stated he had lost by missing a day at work.